Scholars have long debated how legal institutions influenced the economic development of societies and civilizations. This Article sheds new light on this debate by reexamining, from a legal perspective, a crucial segment of the Eighteenth and Nineteenth Century economic divergence between England and China: By 1700, English agriculture had become predominantly capitalist, reliant on “managerial” farms worked chiefly by hired labor. On the other hand, Chinese agriculture counter-productively remained household-based throughout the Qing and Republican eras.

The explanation for this key agricultural divergence, which created multiple advantages for English proto-industry, lies in differences between Chinese and English property rights regimes, but in an area largely overlooked by previous scholarship. Contrary to common assumptions, Qing and Republican laws and customs did recognize private property and, moreover, allowed reasonably free alienation of it. Significant inefficiencies existed, however, in the specific mechanisms of land transaction: The great majority of Chinese land transactions were “conditional sales” that, under most local customs, guaranteed the “seller” an interminable right of redemption at zero interest. In comparison, early modern English laws and customs prohibited the redemption of “conditional” conveyances - mainly mortgages - beyond a short time frame. Consequently, Chinese farmers found it very difficult to securely acquire land, whereas English farmers found it reasonably easy. Over the long run, this impeded the spread of capitalist agriculture in China, but promoted it in England.

Differences between Chinese and English norms of property transaction were, therefore, important to Qing and Republican China’s relative economic decline. By locating the causes of key global economic trends in customary property rights, the Article also has ramifications for influential theories of social norm formation and law and development.